By George Ward
The world’s largest crypto exchange, Binance, established its Secure Asset Funds for Users (SAFU) in 2018 as an insurance fund to shield users’ assets. Accordingly, the exchange explained that the fund consists of a mixture of Bitcoin, its native token, BNB, and stablecoin BUSD.
Prominent Bitcoin analyst, Willy Woo, expressed his concern about the current arrangement of the SAFU fund in a recent post. Based on the on-chain metrics, Woo stated that $397 million of the insurance funds’ $937 million, which is roughly 44%, consisted of the BNB token,
In addition, Woo noted that BUSD occupies 32% of the fund with $300 million, while BTC has 24% with $270 million. The Bitcoin expert added that Binance’s decision to establish such a fund is commendable.
However, it makes no sense to put BNB there due to a clash of interests. Woo asked, “How would the industry feel about the now-collapsed FTX having an insurance fund with mostly FTT?”
According to Woo, the almost $1 billion SAFU fund aims to protect customers’ interests. However, he disclosed that the amount is barely enough to cover the $800 million held in Binance Custody.
Furthermore, Woo stressed that Binance’s current proof-of-reserve is roughly $68 billion.
Binance Debunks Analyst’s Claims
In defence of SAFU, several individuals commented that they have total trust in the legitimacy of the fund and its composition. One person’s comments read, “BNB and FTT tokens are two different assets.”
He added, “the Binance fund is readily available, is not leveraged like the FTT, and has enough liquidity in times of crisis.”
Reacting to the event, Binance CEO Changpeng Zhao explained that there is a reason why the composition of the funds is skewed toward BNB. However, the CEO noted that the $1 billion fund is unevenly split between the tokens, BNB, BUSD, and BTC.
He added that the prices of BNB have spiked faster than BTC after the last rebalancing of the fund. According to Zhao, Binance has already pledged an additional $1 billion to its crypto recovery fund, aside from SAFU.
On Thursday, Binance officially unveiled the Industry Recovery Initiative (IRI). The IRI is a rescue fund for the crypto industry to help struggling exchanges stay afloat and avoid bankruptcy.
The fund had an initial investment of $1 billion, but the Binance CEO announced that his exchange had added $1 billion to the fund.
The announcement revealed that prominent crypto players were also part of the initiative. It added that these players made a collective commitment of another $50 million to the rescue initiative.
Moreover, the funding partners also have the right to review each applicant, up to 150 at the moment. According to the announcement, the fund’s applicants must meet the following requirements:
- Innovation and long-term value addition
- A clear business model
- A risk management plan
Meanwhile, Bybit has also launched a similar recovery drive, like Binance, even though it lacks the financial resources of its rival.